Beyond the sniping and accusations

And so the sniping, accusations and even boasting over the nationalisation of Northern Rock go on. There was no more vivid example than when, on the BBC's Question Time on Thursday, the silver-haired Alan Duncan, the shadow home secretary, gleefully attacked the Government for its failings, which Ruth Kelly, the Transport Secretary, smugly defended, only for Vince Cable of the Lib Dems to brag that it was his idea in the first place. Poignantly, the programme was recorded in Newcastle, the home of the beleaguered bank.

However, it was the voice of Derek Simpson, the secretary-general of Unite, Britain's largest private-sector union, that seemed the most rational. As he said, it's not about scoring political points off each other, the savers or shareholders. It's about people's livelihoods and a community being at stake, he told the audience passionately.

For the hundreds of thousands of savers who have deposited their hard-earned cash in the former building society, not much has changed. No one has lost a penny. In fact, they have probably earned more pennies, given the attractive rates of interest the bank is now offering, and they are also blessed with being savers in the safest bank in the land.

Many investors would have received 500 free shares when the building society demutualised in 1997. Their stakes, worth £2,260 then, are now worth next to nothing. And while I have some sympathy for the shareholders, it is limited. There is no rule that says shares can't fall off a cliff and become worthless - remember Marconi? It is not known how many of the original investors are still clinging on to the shares but at one time their value had tripled - profits were there to be taken.

One stockbroker told me last week that it had advised its non-discretionary clients to get out of Northern Rock back in the autumn when the shares were worth more than £2.50, yet several were resolute. You take your chances with the stock market.

That will be of no comfort to shareholders, although they have had the not insignificant consolation of receiving a total of £2 in dividends for every share held over the past decade. Rather than the shareholders, you should save your sympathy for the employees of the bank - although the less said about the senior executives responsible for the aggressive strategy that was its undoing, the better.

Like many, Northern Rock's employees saved in the bank's Save As You Earn scheme, and it's worth remembering that employee share ownership has been enthusiastically encouraged by Gordon Brown since his party came to power in 1997.

The Prime Minister should not abandon those Northern Rock staff now, not least because if the nationalised operation does scale down, as is highly likely, many are going to need every penny they can get if their jobs are lost. You get the feeling that the Government was on to a loser whichever way it turned - whether it allowed Northern Rock to go bust, took it under its wing or handed it over to Sir Richard Branson.

But the Tories, who are making the most of the opportunity to make the Government squirm, do have every right to question the quality of the mortgage book that the taxpayer is being asked to underwrite. The Government insists all is well; I am not convinced.

My bus journey home used to take me past a branch of Northern Rock in Brighton and I used to be amazed to see the cheap deals on offer in the window. Particularly outstanding were the two-year fix at 1.85 per cent in 2004, when the base rate was 3.75 per cent, and the 2.79 per cent two-year fix when rates stood at 4.75 per cent in September 2004.

The bank also offered some tasty buy-to-let deals at under 4 per cent to would-be property tycoons – although the sting in the tail was the nasty redemption penalties. The two-year fixed periods on those mortgages may well be up, but borrowers are tied in for a further five years on the standard variable rate - currently a stonking 7.59 per cent – unless they pay a hefty exit fee.

What's more, Northern Rock was the biggest player in the first-time buyers' market, thanks to its Together mortgage - which was withdrawn last Thursday. A maximum of 95 per cent of this mortgage was secured on the property and up to 30 per cent was in effect an unsecured loan at the same rate as the mortgage.

In the first half of last year, the Together range represented a quarter of Northern Rock's new lending, while for the whole of 2006 it represented around a third. Mortgages of 100 per cent or more of the property's value are fine in a rising market but much less attractive in a downturn.

Figures from Halifax show that the average house price has jumped from £180,000 in summer 2006 to £197,000 today, while the average property was worth just £196,000 a few months ago. So people who took out 125 per cent loans in the past two years are still in negative equity - and the gap is widening as house prices begin to fall.

Given the gloomy outlook, repossessions are expected to rise. It will be the overstretched borrowers and those saddled with negative equity who are the most vulnerable. Given Northern Rock's exposure to those people, the taxpayers' burden could get heavier.

The nationalisation is said to be temporary: once the troubled bank is back on a firm footing it will be returned to the private sector. When that will be is anyone's guess and I doubt that Ron Sandler, the man charged with getting to the bottom of this mess, has the answer. It means the sniping, accusations and boasting will go on. This will be of little comfort to anyone associated with the bank- or to the taxpayers who are footing the bill.

BLOWING A GASKET

It didn't make sense to me, either. We have been told by countless energy providers that our utility bills will have to rise by four times the rate of inflation because of higher wholesale prices. Unfortunate, but apparently reasonable. And then we learn that British Gas has made a whopping £571m in profits. True, companies are out to make money - and millions of us benefit from their returns in our pension funds - but it does not add up. Thankfully, Ofgem, the energy watchdog, smells a rat too.